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New Law Will Significantly Impact the Way Many Mutual Water Companies Conduct Business

Assembly Bill 240 (“AB 240”) introduced by Assembly Member Anthony Rendon has been signed by Governor Brown and takes effect on January 1, 2014. AB 240 will significantly impact the way mutual water companies that operate public water systems conduct their business.

Many Californians receive their drinking water from mutual water companies. These are private water companies, many of which operate public water systems. The state or local department of health may require water quality reports; however, no other public agency oversees their operations. The intent of AB 240 is to force mutual water companies to operate more like public agencies. The bill sets forth new requirements aimed at increasing transparency and oversight. The provisions of AB 240 include open meeting requirements similar to those contained in the Brown Act (the law governing public agency open meeting laws).

AB 240 sets forth the Mutual Water Company Open Meeting Act. Similar to the Brown Act, the Mutual Water Company Open Meeting Act requires mutual water companies to allow shareholders of the mutual water company or others who receive drinking water from the company, to attend meetings of the board of directors. In addition, the mutual water company must provide notice of its meetings, which must include an agenda of the items to be discussed at the meeting. Board members may not take action outside of noticed meetings, except in certain emergency situations.

AB 240 also contains requirements similar the Public Records Act, which is applicable to public agencies. Mutual water companies must now make specified documents, such as minutes, agendas, the annual budget, and records reporting the results of water quality testing available to shareholders and others who receive drinking water from the mutual water company.

The new legislation also includes mandatory additional board member training, requirements that the board adopt an annual budget and contract with a public accountant to conduct an annual review of the financial records of the mutual water company.

This new legislation creates a completely new statutory scheme, which will require mutual water companies that operate public water systems to enact new policies and procedures in order to comply with all of the new requirements. Carmel & Naccasha represents both public agencies and mutual water companies. Therefore, Carmel & Naccasha is well equipped to guide its mutual water company clients through the onerous new requirements contained in AB 240.

Full text of the bill can be found the California Legislative Information website @